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contributed to the property [sic], it may
consist of property contributed to the
partnership on the amount paid to a retiring
partner for his interest.
The testimony and exhibits show that
Petitioner purchased an interest in 1968 and
paid a portion of debt due to retiring
partners after the 1985 consumption of 4/7 of
the former junior partners' debt to the named
partners who had sold their interests.
The contribution to the partnership by
the Petitioner of work in process and accounts
receivable are contributions of property.
This is recognized by IRC � 724 which deals
with unrealized receivables and inventory.
Work in process is the inventory of a law firm
and accounts receivable are unrealized
receivables. The value of those two items
alone produced and contributed by Petitioner
are significantly more than the deduction
claims.
Petitioner's reasoning is flawed. Petitioner is not entitled
to a deduction for failure to realize anticipated income. Hort v.
Commissioner, 313 U.S. 28 (1941). Petitioner has not acquired a
basis in the accounts receivable and work in progress under section
705 unless the amounts of these items had been reflected in the
income of the partnership and in petitioner's distributive share in
1990 or in prior years. Holman v. Commissioner, 66 T.C. 809, 816-
817 (1976), affd. 564 F.2d 283 (9th Cir. 1977). But as a cash
basis taxpayer, Heidelberg & Woodliff's accounts receivable and
work in progress are not reflected in the partnership's income (nor
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